Tuesday, May 24, 2011

Retracement before the trend continues

The following tables are an example of regular divergence. Just because we see regular divergence when comparing two highs in uptrend or a comparison of the two lows in a downtrend, it is not automatic trade. If this trend is strong enough, you can just throw out price action or one or two bar retracement before the trend continues. Regular divergence can be a tool to answer the question whether this trend is gaining or losing momentum.

Regular divergence in the uptrend (higher highs / higher lows) compares the higher price highs in the indicator. Note that both stochastics and MACD have lower high price, while having higher .... Report this trend is getting weak.

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